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They created 14 college funds because each individual 529 allows a lump sum $150k married gift tax free. With that only totalling $2.1m of tax free income, I’m

They created 14 college funds because each individual 529 allows a lump sum $150k married gift tax free. With that only totalling $2.1m of tax free income, I’m confident they did a lot more stuff with the remaining $5.9m. Anyway it’s kind of ironic you are comparing the state’s education spending to a tax avoidance scheme.

SomeHacker44 6y ago
I would imagine the price for college exceeds $150,000 in many cases. I have a savings target well in excess of that for my son.
- an_opabinia 6y ago
  I mean this in the best possible way, try punching "529 Plan" into Google. The point of the comment, which I'm not sure why it was being downvoted, is why something might sound newsworthy (14 college funds?) when it really has a simple, logical explanation if you're sophisticated with money. And in the same breath, in applause of a guy performing a tax optimization, the original poster shits on the state - did it create this tax loophole? Do you think the people running government want college to be expensive? Rich people, really everyone with heritable wealth, love the 529 plan. If you understood that it is used to create multi-purpose, heritable investment accounts tax-free in vast excess of the actual cost of tuition - that anyone who would have a hard time paying Harvard's tuition goes for free anyway - you would detect some insincerity in "14 college funds" too! And maybe consider that this 529 plan remains the status quo, this total tax dodge, because of people who have this romanticized picture of it being used to pay expensive college tuitions. We're talking about a family so sophisticated that it's probably going to change legal guardians on those very same children in order to benefit from free tuition anyway. It's a great story. We certainly want our brainiacs spending resources "hacking" some shitty institution like the lottery. On the other hand, you think he doesn't take beyond his measure from the government too?
- Communitivity 6y ago
  The 529 plan, specifically the prepaid tuition plan, is an amazing option here. Another user has already pointed this out, but I want to add personal direct experience. We used the 529 plan for our daughter, who will go to college in a few years. Let's say 5 for the purpose of the math. At this year's price her 4 years of college tuition will cost her ~ $48k. This total expected to go up around $10k every year before she gets to college (around $2k annual tuition rise, over 5 years). So if we paid her tuition when she went in five years, we would pay $20k, $22k, $24k, $26k, for a total of $92k. Instead we pay $50k now, and are guaranteed to not have to pay any additional tuition costs, for a savings of $42k. The tax deferment might be another $8k (spitballing). Which means the using a 529 plan now you can send two kids to college in 5 years for the price of sending one to college in 5 years and paying for it then. Yes, there are risks. * They may want to go to a private school, or out of state. The money isn't lost, but you don't get the guarantee either. You just get the money applied to the tuition. * Tuition prices may come down and stay down. They haven't yet, and it seems unlikely without major upset. They might come down over the next year, but I suspect they'll go back up. * Universities may become free, or become extinct in their current form. With any forward-looking investment there is a risk of a true disruption that completely changes the landscape. This would be such a huge change that it's not likely to completely happen within the 9 years until she would graduate, if it happens at all.
mywittyname 6y ago
Honestly, it doesn't matter how they paid for the college. Even if a 529 could not be used to offset taxes lottery winnings, they could just as easily gifted their grandkids that much money, tax free (federally, at least). The only irony here is the fact that the grandparents spend a higher portion of their proceeds on education than the state (probably, every state is different), and still had plenty of money left over for vacations and other fun stuff. The biggest selling point of state lotteries is that the money is is used "for education." Califoria is coming under fire for not giving enough of the lottery money to schools, and they only require 1/3rd of proceeds to go to education, and allow about 1/6th of the proceeds to be used for "administration costs" within the schools. In other words, these people utilizes more of their winnings for education than the state probably did, despite using the majority of the money for non-education-related expenses. Even though, most lotteries are sold as financing for education. That's what irony looks like.
- an_opabinia 6y ago
  > fact that the grandparents spend a higher portion of their proceeds on education $0 has been spent on education so far. $2m has been put into an investment account whose realized gains are tax free. You can bet people withdraw with the 10% penalty all the time to spend that money on whatever they want, not college. The state also runs its own investment accounts, like this individual does, and spends it on many totally worthy concerns, like paying pensions that are used by beneficiaries to pay for housing, food and indeed, sometimes education, so maybe that's the more appropriate comparison. > they could just as easily gifted their grandkids that much money, tax free (federally, at least) I don't think that's true, and your information appears to be the result of doing Google searches on SEO'd tax and accounting law partnership pages. It seems like there a lot of misunderstandings anyway about how this stuff works. Can they reduce the taxes they would otherwise pay on the lotto income? Of course, creating 14 529 plans (as opposed to say, 1, or 0) is an important part of that strategy. Then there are so called experts working in finance chiming in, which if I could point to anyone being a complete waste of money for baby boomers in the last 20 years, it’s CFAs collecting 1.0-1.5% AUM every year on top of mutual fund fees that all underperformed low cost indices. The kind of assholes who, in the absence of any normative measure, have finally settled on justifying their high fees as “not answering the phone when you want to panic sell.” It’s infuriating, honestly, the lack of any sophistication whatsoever and the trust put into total leeches like CFAs. And here we are, getting lost in the tax details, from people who would balk at paying a retainer for an ongoing professional opinion instead of a management fee - when those opinions could save them literally millions over the lifetime of a windfall like this - and wind up on SEO’d advice pages googling stuff themselves instead. A bunch of temporary embarrassed billionaires Googling, shitting on how the state spends money, voting in tax cuts for people much richer than them. I don’t have expertise either, I’m not a lawyer or an accountant ,but consider paying one the pathetically small fee it would cost to get an answer to these questions that make sense for you and your situation.

SomeHacker44 6y ago

I would imagine the price for college exceeds $150,000 in many cases. I have a savings target well in excess of that for my son.

an_opabinia 6y ago
I mean this in the best possible way, try punching "529 Plan" into Google. The point of the comment, which I'm not sure why it was being downvoted, is why something might sound newsworthy (14 college funds?) when it really has a simple, logical explanation if you're sophisticated with money. And in the same breath, in applause of a guy performing a tax optimization, the original poster shits on the state - did it create this tax loophole? Do you think the people running government want college to be expensive? Rich people, really everyone with heritable wealth, love the 529 plan. If you understood that it is used to create multi-purpose, heritable investment accounts tax-free in vast excess of the actual cost of tuition - that anyone who would have a hard time paying Harvard's tuition goes for free anyway - you would detect some insincerity in "14 college funds" too! And maybe consider that this 529 plan remains the status quo, this total tax dodge, because of people who have this romanticized picture of it being used to pay expensive college tuitions. We're talking about a family so sophisticated that it's probably going to change legal guardians on those very same children in order to benefit from free tuition anyway. It's a great story. We certainly want our brainiacs spending resources "hacking" some shitty institution like the lottery. On the other hand, you think he doesn't take beyond his measure from the government too?
Communitivity 6y ago
The 529 plan, specifically the prepaid tuition plan, is an amazing option here. Another user has already pointed this out, but I want to add personal direct experience. We used the 529 plan for our daughter, who will go to college in a few years. Let's say 5 for the purpose of the math. At this year's price her 4 years of college tuition will cost her ~ $48k. This total expected to go up around $10k every year before she gets to college (around $2k annual tuition rise, over 5 years). So if we paid her tuition when she went in five years, we would pay $20k, $22k, $24k, $26k, for a total of $92k. Instead we pay $50k now, and are guaranteed to not have to pay any additional tuition costs, for a savings of $42k. The tax deferment might be another $8k (spitballing). Which means the using a 529 plan now you can send two kids to college in 5 years for the price of sending one to college in 5 years and paying for it then. Yes, there are risks. * They may want to go to a private school, or out of state. The money isn't lost, but you don't get the guarantee either. You just get the money applied to the tuition. * Tuition prices may come down and stay down. They haven't yet, and it seems unlikely without major upset. They might come down over the next year, but I suspect they'll go back up. * Universities may become free, or become extinct in their current form. With any forward-looking investment there is a risk of a true disruption that completely changes the landscape. This would be such a huge change that it's not likely to completely happen within the 9 years until she would graduate, if it happens at all.

mywittyname 6y ago

Honestly, it doesn't matter how they paid for the college. Even if a 529 could not be used to offset taxes lottery winnings, they could just as easily gifted their grandkids that much money, tax free (federally, at least). The only irony here is the fact that the grandparents spend a higher portion of their proceeds on education than the state (probably, every state is different), and still had plenty of money left over for vacations and other fun stuff. The biggest selling point of state lotteries is that the money is is used "for education." Califoria is coming under fire for not giving enough of the lottery money to schools, and they only require 1/3rd of proceeds to go to education, and allow about 1/6th of the proceeds to be used for "administration costs" within the schools. In other words, these people utilizes more of their winnings for education than the state probably did, despite using the majority of the money for non-education-related expenses. Even though, most lotteries are sold as financing for education. That's what irony looks like.

an_opabinia 6y ago
> fact that the grandparents spend a higher portion of their proceeds on education $0 has been spent on education so far. $2m has been put into an investment account whose realized gains are tax free. You can bet people withdraw with the 10% penalty all the time to spend that money on whatever they want, not college. The state also runs its own investment accounts, like this individual does, and spends it on many totally worthy concerns, like paying pensions that are used by beneficiaries to pay for housing, food and indeed, sometimes education, so maybe that's the more appropriate comparison. > they could just as easily gifted their grandkids that much money, tax free (federally, at least) I don't think that's true, and your information appears to be the result of doing Google searches on SEO'd tax and accounting law partnership pages. It seems like there a lot of misunderstandings anyway about how this stuff works. Can they reduce the taxes they would otherwise pay on the lotto income? Of course, creating 14 529 plans (as opposed to say, 1, or 0) is an important part of that strategy. Then there are so called experts working in finance chiming in, which if I could point to anyone being a complete waste of money for baby boomers in the last 20 years, it’s CFAs collecting 1.0-1.5% AUM every year on top of mutual fund fees that all underperformed low cost indices. The kind of assholes who, in the absence of any normative measure, have finally settled on justifying their high fees as “not answering the phone when you want to panic sell.” It’s infuriating, honestly, the lack of any sophistication whatsoever and the trust put into total leeches like CFAs. And here we are, getting lost in the tax details, from people who would balk at paying a retainer for an ongoing professional opinion instead of a management fee - when those opinions could save them literally millions over the lifetime of a windfall like this - and wind up on SEO’d advice pages googling stuff themselves instead. A bunch of temporary embarrassed billionaires Googling, shitting on how the state spends money, voting in tax cuts for people much richer than them. I don’t have expertise either, I’m not a lawyer or an accountant ,but consider paying one the pathetically small fee it would cost to get an answer to these questions that make sense for you and your situation.